Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/72

 § 79.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. V. sume all liability which would have attached to them had the act been authorized by them before it was done. They must ratify in toto, if at all, unless of course the other contracting party, with full knowledge of the situation, agrees to a vari- ation from the original liability. 1 § 79. Seasoning by analogy from the above, it would seem that in so far as the subsequently formed corporation assumes the liability of the promoter, who contracted as its agent, towards the other contracting party, who contracted with the promoter as the agent of the corporation, and gave credit to the corporation, knowing that it had not yet been organized — something highly improbable, 2 the personal liability of the promoter would cease ; and for the same reasons as before ; for it was to the corporation that the other contracting party gave the credit, and the corporation has assumed the liability. To be sure, if the other contracting party did not know that the corporation was unorganized at the time, he cannot justly be presumed to have contracted on its credit; and therefore no subsequent ratification by the corporation would free the pro- moter from personal liability; and, if the promoter represented that the corporation was organized when the contract was made, he would be liable in an action for deceit. Finally, while it may be true that the subsequently formed corporation agrees by implication, on adopting the contract of its promoter, to indemnify him from all liability under the same, and this because the corporation is entitled to the full benefit of the contract, 3 yet this reason fails when considering the rights of the other contracting party, who may have good grounds for refusing to accept the exclusive liability of a body which had not been organized at the time of making the con- tract. 1 See Propositions VII. and VIII., §75. 2 It could never be presumed that a party contracting with a promoter gave credit to a body not yet organ- ized. Therefore evidence would be required to establish the fact that 52 credit was given to the corporation; and, unless the whole transaction had been reduced to writing, this would be a question for the jury. See §76. 3 See §§ 82-84.